At 50, Medicare’s future looks healthier than before

Across the country, celebrations large and small were recently held in honor of Medicare’s 50th birthday. These celebrations were well deserved since Medicare is one of the most successful programs of the past century. And while the excitement of the birthday still lingers, no one should rest on their laurels. Policymakers must apply lessons learned to present challenges and make the changes necessary to secure Medicare for the future. The work to ensure another successful 50 years has just begun.

Since it was signed into law in 1965, Medicare has grown into the nation’s largest healthcare program, covering over 54 million Americans age 65 and over as well as individuals with certain disabilities. Over the years, the program’s increased focus on preventive care has helped increase the nation’s life expectancy from about 70 years in 1965 to nearly 80 years today. Every month, about 250,000 Americans turn 65 and become eligible for the program. As the baby boomer generation continues to age, Medicare’s biggest challenges include supporting a larger “family” of beneficiaries, staying fiscally “healthy,” and reducing costs.

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By 2030, 76 million additional baby boomers will be eligible for Medicare, but there will not be enough Americans paying into the program to sustain the current level of care and benefits. That same year, Medicare is expected to be bankrupt; its own 65th birthday.

Until recently, Medicare has been on an unsustainable financial path. The program’s method of paying for care, called fee-for-service, which pays physicians for each and every test and procedure regardless of benefit, contributed greatly to higher spending without improving health outcomes. When this reality is coupled with the aging baby boomer generation, the prognosis for Medicare’s long-term health looks grim.

But, Medicare’s future is beginning to look brighter.

While only time will tell, this year’s achievements in reform make us much more optimistic about Medicare’s future.

This January, Health and Human Services (HHS) Secretary Sylvia Mathews Burwell sent a signal that the old system of paying doctors and hospitals was on its way out the door. In a historic announcement, the agency established measurable goals and a clear timeline for transitioning Medicare to quality and value-based payments. Instead of paying by procedure, Medicare was going to transition to paying for improved health outcomes – often called value-based payments. By the end of 2016, HHS hopes to see 30 percent of fee-for-service Medicare payments tied to quality or value through alternative payment models ; 50 percent by the end of 2018. This announcement was the first of its kind in Medicare’s 50-year history.

The same month of Secretary Burwell’s announcement, the Centers for Medicare and Medicaid Services (CMS) began paying physicians to coordinate care for chronically ill Medicare beneficiaries. Sixty-three percent of Medicare beneficiaries have three or more chronic conditions – such as diabetes, heart disease or breast cancer – and often see different medical specialists to treat each condition. In fact, chronic disease care accounts for 95 percent of Medicare spending. CMS’ new payments for care coordination align program spending with the kind of care millions of beneficiaries need, while also addressing the leading cost driver in the program.

A great example of successful care coordination is in the 30-year-old Medicare Advantage (MA) program. Through MA, health plans receive upfront, monthly payments for each of their beneficiaries and work with physicians to deliver integrated, team-based care. All health care providers involved in a patient’s care are in sync, ensuring each patient receives the most appropriate care at the right time. A large emphasis on prevention means physicians are able to make diagnoses early and members avoid more costly care down the road. Furthermore, quality measures keep physicians accountable and reward them for reaching set goals. MA plans have seen great success in reducing the costs associated with complex chronic care management, while dramatically improving patient outcomes and care quality. Similar to the care MA already provides, physicians in traditional Medicare are now reimbursed for certain services beyond in-person visits, which incentivizes more efficient health care delivery and smoother transitions of care.

But the good news for Medicare continues. In April, Congress passed bipartisan legislation to repeal and replace the sustainable growth rate (SGR) formula, which Medicare used to determine how much to pay doctors. The law’s new model rewards doctors who meet set performance thresholds, improves payment accuracy, and incentivizes care coordination for patients with chronic conditions. This new system is a significant win for Medicare and beneficiaries and further shifts the program towards a more modern and sustainable model.

Perhaps one of the most promising developments was CMS’ recent announcement that ties hospitals’ Medicare payments for knee and hip replacement surgery to the quality of care patients receive. In the Comprehensive Care for Joint Replacement model, hospitals where the surgeries take place would be held accountable for the entire episode of care, from surgery through post-acute and follow-up care. Providers that perform well would receive bonuses, and those that do not would be required to repay Medicare a portion of the costs.

These are the kind of changes that are addressing the challenges of today while positioning Medicare to respond to the opportunities of tomorrow – a focus on disease prevention, care coordination and wellness.

And while the long-term picture of Medicare’s health is still at risk, action over the last six months suggests that Medicare should make it to its own 65th birthday.

As we reflect on Medicare’s 50th birthday, we can look to the future with hope that the next 50 years will be as good as the last.

Holtz-Eakin, president of the American Action Forum, and Thorpe, the Robert W. Woodruff professor and chairman of the Department of Health Policy and Management at Emory University, are co-chairs of the Partnership for the Future of Medicare, a bipartisan organization focused on ensuring the long-term security of Medicare.